Unit I: Investment Environment 4 hours
Meaning of investment; investment alternatives; securities markets; securities market institutions; investment process; the risk-return trade-off; and Nepalese investment environment.
Unit II: Assets Classes and Financial Instruments 8 hours
The money market: treasury bills, certificates of deposit, commercial paper, bankers’ acceptance, Eurodollars, the Libor market, yield on money market instruments; the bond market: treasury notes and bonds, inflation-protected treasury bonds, federal agency bonds, international bonds, municipal bonds, corporate bonds, mortgages and mortgage-backed securities; equity securities: common stock – characteristics and listing, preferred stock, depository receipts; stock and bond market indexes: stock market indexes – price-weighted index, value-weighted index, equally-weighted index; Nepal Stock Exchange index, bond market indicators; and derivative markets.
Unit III: Securities Markets 6 hours
Concept of securities markets; issue of securities; privately held firms and publicly traded companies; shelf registration; initial public offerings; trading of securities; types of markets; types of orders; trading mechanisms; the rise of electronic trading; ECNs; new trading strategies; globalization of stock markets; trading costs; buying on margin; short sales; functions of Nepal Stock Exchange; and role of Nepal Securities Board.
Unit IV: Risk and Return 6 hours
Concepts of risk and return; measuring investment returns: holding period return, returns over multiple periods, annualizing rates of return, expected return, time series of return; inflation and real rates of return; measuring risk: variance, standard deviation, coefficient of variation; portfolio return and risk of a portfolio of risky and risk-free assets.
Unit V: Efficient Diversification and CAPM 8 hours
Diversification and portfolio risk; asset allocation with two risky assets; covariance and correlation; the risk-return trade-Off with two-risky-assets; the mean-variance criterion; the optimal risky portfolio with a risk-free asset; efficient diversification with many risky assets; the efficient frontier of risky assets; choosing the optimal risky portfolio. The Capital Asset Pricing Model: The Model: Assumptions and Implications, the security market line, and application of CAPM.
Unit VI: Bond Prices and Yields 8 hours
Bond characteristics; treasury bonds and notes; corporate bonds; international bonds; innovation in the bond market; bond pricing; bond pricing between coupon dates; bond pricing in excel; bond yields: yield to maturity, yield to call, realized compound return versus yield to maturity; bond prices over time; yield to maturity versus holding-period return; zero-coupon bonds and treasury STRIPS; after-tax returns; default risk and bond pricing; junk bonds; determinants of bond safety; bond indentures; yield to maturity and default risk; credit default swaps.
Unit VII: Equity valuation 8 hours
Valuation by comparables; limitations of book value; intrinsic value versus market price; dividend discount models; the constant-growth DDM; stock prices and investment opportunities; life cycles and multistage growth models; price–earnings ratios: the price–earnings ratio and growth opportunities; pitfalls in P/E analysis; other comparative valuation ratios; free cash flow valuation approaches; comparing the valuation models; the problem with DCF models.